Obtain Required Approvals

Although you have not negotiated final contracts at this stage, you may find it necessary to obtain provisional approval of the transaction in order to complete the negotiation. The requirements of your internal process should be clear to you on this point; if they are not, it is much better to ask questions now rather than waiting until after you have negotiated the contract. 

The approver is most commonly the CFO, but it is not uncommon for the PPA to require the approval of others (up to and sometimes including the board). This page refers to the CFO, but you should substitute the approver relevant to your organization. 

This page describes:

• The type of economic analysis CFOs commonly require; and

• BRC Canada’s CFO Pitch Deck, which can serve as a template or guide for making these final presentations to C-level executives.

Economic analysis

The most important unknown in assessing the economics of a large off-site renewable energy transaction is the long-term electricity price forecast. Most CFOs are aware that this is something of a “crystal ball” exercise. Depending on their personal preferences, they may follow different types of approaches. Here is a sample of what we have seen.

• Fundamental analysis: Some CFOs will rely on forecasts provided by specialized firms, such as Ventyx (ABB), Wood Mackenzie, or Platts (McGraw Hill Financial), and derive from that an understanding of the PPA’s potential profits and losses.

• Short-term analysis and long-term risk assessment: Other CFOs do not trust long-term forecasts. They prefer to focus on short-term price analysis and long-term price risk assessment. To assess the long-term risks, CFOs could pursue one or more of the following options:

  • hire an external consultant (e.g., an investment bank with energy trading experience);

  • develop an in-house analysis of historical prices;

  • create an in-house analysis of “reasonable worst case” scenarios.

It is therefore important to understand early on how your CFO will assess the economics of the deal to avoid unnecessary frustration later in the process. However, from REBA interviews with experienced buyers, they found that the vast majority do not attempt to pitch the PPA in terms of its net present value (especially as a money-maker). It is far more common to pitch the PPA as a purchase necessary to achieve sustainability targets and to describe the reasonable downside risks of the purchase. 

BRC Canada’s Internal Support Guide provides additional information on how to provide a robust economic assessment of the deal.

The CFO pitch deck

BRC Canada is working on a CFO Pitch Deck that breaks down best practices when working with a CFO, CFO’s office or other C-level financial approver. The CFO Pitch Deck includes:

• Lessons regarding messaging, including timing, approaches, risk mitigation and meeting tips;

• How formal meetings with an approver will differ depending on a transaction’s progress through the process; and

• Meeting decks used by buyers at each stage of identified formal meeting point.

BRC Canada’s CFO Pitch Deck can be used or drawn from in the final presentation to the approver. It is intended as a resource you can adapt to fit your presentation style and process; you may use the information inside however you wish. The CFO pitch deck was created by the REBA and adapted for Canada by the Pembina Institute.